Experts critical of bill to treat nation as ‘developed country’, warn of severe economic repercussions

The US’ attempt to reclassify China as a “developed country” is misguided, built on bad intentions and may have severe economic repercussions, analysts said.

On March 27, the US House of Representatives unanimously passed the PRC Is Not a Developing Country Act. The bill is directed to push the State Department to take action to change China’s status from “developing country” to “developed country” within international organizations.

The move is “solely aimed at undercutting a nation that the US views as its major ‘competitor’,” said William Jones, the Washington bureau chief of publication Executive Intelligence Review.

“Some people would argue, as lawmakers are doing, that China should not be regarded as a ‘developing country’ because of its large GDP and the rapid development in places like Shenzhen and Shanghai,” Jones said. 

“Through great efforts, China has eliminated absolute poverty, but its individual GDP is one-fifth that of the United States, and keeping people out of poverty will still require major efforts by the central government until the Chinese economy advances to a point where individual income is secure and at a level that can be comparable to that of other developed countries.”

If enacted, the bill could impact China’s standing in international bodies like the World Trade Organization, which provides developing countries with preferential treatment, observers said.

However, Sourabh Gupta, a senior fellow at the Institute for China-America Studies, said that US domestic politics on this issue is “mostly irrelevant”.

“It doesn’t really matter what the US government or what the House says because the US doesn’t provide any aid or preferences to China economically on the basis of this label, whether it’s a developing country or a developed country,” said Gupta. “So, whatever the House does at this level is immaterial. It has no real impact in terms substantively.”

At the global and international organizational level, Gupta said each of the international organizations has their own or a little different definition of what a developing country is.

“The one which does have hard numbers behind it is typically the World Bank, which has various categories. And at about $30,000 per capita, they start clubbing you within the advanced economies or the developed countries.”

Gupta said that from around 2005, the US has been saying that China and India need to be re-categorized as advanced developing countries or something beyond that.

“Even when China was kind of a $2,000 per capita economy, they wanted to reclassify China. So the US doesn’t have any good intentions out here,” he said.

In her speech on March 27, US Representative Young Kim — one of the two politicians to co-sponsor the bill — alleged that China was exploiting its status by applying for development assistance and loans, while spending trillions on infrastructure projects in developing countries as part of what she called “the debt trap diplomacy scheme known as the Belt and Road Initiative”.

“I think this is nonsense. BRI is a flagship project. China has got no interest in bankrupting developing countries because that just brings the whole scheme into disrepair. China’s got every interest in making sure that does not happen,” said Martin Jacques, a senior fellow at the University of Cambridge.

Executive Intelligence Review’s Jones pointed out that trying to restrict China’s development by depriving it of its rights as a developing country is not only a blow to the Chinese population, but also to the entire developing world, which has benefited from China’s outreach in the Belt and Road Initiative.

Jones said “more and more countries will rally around the alternative structures of governance now available to them”, whether it be BRICS, the Shanghai Cooperation Organization or the Global Development Initiative.

Alessandro Golombiewski Teixeira, former Brazilian minister and economic adviser to the president of Brazil, said the BRI has helped other developing countries a lot “as a collaboration platform”.

The US is trying to put China on a different level because they want to frame China with different policies, he said. “I think that’s wrong. I think China needs to continue because in many areas China has achieved developments, but it is still a developing country,” Teixeira added.

Deniz Istikbal, economics researcher at the Foundation for Political, Economic and Social Research in Turkiye, agreed China is still a developing country. It has been successful in many industries and sectors like agriculture over the last 50 years, but it still needs to improve in many areas.

Istikbal said he disagrees with the debt trap accusation. “When a Western country invests in underdeveloped (countries), that’s fine and the Western country is ‘doing great’. But if China did something, it is wrong,” he said.

Sujoko Efferin, a professor at the Faculty of Business and Economics at Universitas Surabaya in Indonesia, said research has found that debts owed by countries such as Sri Lanka are “dominated by Western creditors” and not the Chinese government or banks. 

“China has freed African countries from their debts, something that Western creditors have never done,” he added.

Prime Sarmiento and Xu Weiwei in Hong Kong contributed to this story.

Contact the writers at jan@chinadailyapac.com